Correlation Between Netflix and NIBE Industrier

Can any of the company-specific risk be diversified away by investing in both Netflix and NIBE Industrier at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Netflix and NIBE Industrier into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Netflix and NIBE Industrier AB, you can compare the effects of market volatilities on Netflix and NIBE Industrier and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Netflix with a short position of NIBE Industrier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and NIBE Industrier.

Diversification Opportunities for Netflix and NIBE Industrier

-0.67

Correlation Coefficient

Netflix  NIBE Industrier

Excellent diversification

The 3 months correlation between Netflix and NIBE is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and NIBE Industrier AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIBE Industrier AB and Netflix is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Netflix are associated (or correlated) with NIBE Industrier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIBE Industrier AB has no effect on the direction of Netflix i.e., Netflix and NIBE Industrier go up and down completely randomly.

Pair Corralation between Netflix and NIBE Industrier

Given the investment horizon of 90 days Netflix is expected to generate 6.39 times less return on investment than NIBE Industrier. But when comparing it to its historical volatility, Netflix is 5.51 times less risky than NIBE Industrier. It trades about 0.2 of its potential returns per unit of risk. NIBE Industrier AB is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  429.00  in NIBE Industrier AB on September 25, 2024 and sell it today you would earn a total of  148.00  from holding NIBE Industrier AB or generate 34.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Netflix  vs.  NIBE Industrier AB

Netflix

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

NIBE Industrier AB

Risk-Adjusted Performance

5 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NIBE Industrier AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental drivers, NIBE Industrier reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and NIBE Industrier

The main advantage of trading using opposite Netflix and NIBE Industrier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, NIBE Industrier can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NIBE Industrier will offset losses from the drop in NIBE Industrier's long position.

The idea behind Netflix and NIBE Industrier AB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.